Petrol price up by over Rs 7.50, steepest hike ever

NEW DELHI: By the time you read this, petrol price would have gone up by more than Rs 7.50 a litre across the country. This is the steepest-ever increase and came a day after Parliament's budget session ended and PM Manmohan Singh talked about the need for "difficult decisions".

After adding state taxes, petrol will cost Rs 73.18 a litre in Delhi, Rs 78.57 in Mumbai, Rs 77.88 in Kolkata and Rs 77.53 a litre in Chennai. This marks an increase of around 10% and puts a squeeze of roughly Rs 6,000 a year on a family that spends an average of Rs 5,000 per month on petrol.

This is the first upward revision in petrol price since November 4, 2011. The highest increase so far has been by Rs 5 per litre. State-run oilmarketers twice raised prices by this amount -- on May 15, 2011 and May 24, 2008 when petrol price crossed the Rs 50 a litre mark for the first time.

The decision immediately drew a howl of protest and demand for rollback from parties across the political spectrum, including UPA allies such as Trinamool Congress chief Mamata Banerjee. But the West Bengal chief minister also made it clear that she will not rock the UPA boat.

Consumers too voiced their anguish even as they thronged petrol pumps for a "cheaper" tank-up one last time. Police had to be called in to control the spiraling queues in many pumps in Delhi and elsewhere.

The announcement of price revision came when oil minister S Jaipal Reddy is away in Turkmenistan to attend a ceremony for signing a four-nation gas pipeline deal. Finance minister Pranab Mukherjee laid the onus of the raise on the oil marketers. "The decision has been taken. Petrol is a deregulated commodity," he said.

The government had freed petrol price in June 2010 when crude came down to around $40 a barrel from a historic high of $147 per barrel in July 2008. But in practice, oil companies do not move without a signal from the parent oil ministry which officially continues to deny any control.

Sources said the increase was stage-managed. Oil companies usually review prices on the 15th and last day of each month. But Wednesday's increase was announced mid-week to take advantage of Reddy's absence after the Parliament session. Reddy reportedly gave his go-ahead for raising petrol price before leaving for Turkmenistan. His absence gave an opportunity for the government to distance itself from the raise and reinforce the impression that it did not control its price as it was a deregulated fuel.

But oil companies described the hike as a "do-or-die" measure. R S Butola, chairman of market leader IndianOil Corporation, argued that the price had to be increased steeply since they had not revised it for the last seven months even though global prices of crude went up 3.5% and petrol in bulk markets rose 14.5%, even as the rupee continued its slide against the dollar.

"We did not raise petrol price for so long due to the prevailing conditions in the market. As a result, all three retailers together piled up a loss of Rs 2,321 crore between the last price hike in November and March 31. Since March alone, we have taken a hit of Rs 2,330 crore. The rupee too has fallen some 3-4%. The government would not have compensated these losses as petrol is a deregulated product."

Butola did not comment when asked whether he had secured the ministry's nod earlier to raise petrol price once the Parliament session was over. "We had told the government in writing that either it takes back control over petrol or we would have no option but to raise the price steeply. We did what we had to do. There was no choice left for us."